Siemens Said to Prepare 1,400 Job Cuts Amid Profit Push

Siemens AG (SIE) is preparing to
eliminate 1,200 to 1,400 jobs at three sites of its energy and
infrastructure businesses to bolster profitability, according to
two people familiar with the matter.

Europe’s biggest engineering company is in talks with union
representatives about cuts at operations in the German cities of
Erlangen, Offenbach and Leipzig, said the people, who asked not
to be identified as the plans aren’t public.

Chief Executive Officer Peter Loescher in October outlined
a two-year efficiency plan to simplify processes, eliminate
redundant functions and examine units not meeting profit
expectations. While he said that redundancies are not the main
focus of the plan to reduce costs by 6 billion euros ($7.8
billion) by 2014, the company has identified about 8,000
potential job cuts globally, a person familiar with the plan
said at the time. Siemens has about 370,000 employees.

Siemens said today that the company talked yesterday to
union representatives about its plans to reduce costs in the
next two years. The company didn’t give a figure for potential
job cuts.

The energy sector’s Erlangen and Offenbach operations will
probably share 650 of the job cuts, while the infrastructure and
cities division will potentially also reduce jobs in Munich, one
of the people said. Some positions may be moved to locations
such as the Czech Republic, the person added.

Falling Behind

Siemens’s energy business said today it’s planning to
reduce headcount at its energy solutions unit, which focuses on
building entire power plants and has sites in Vienna as well as
Erlangen and Offenbach. The euro crisis led to a collapse in new
power plant investments and the cuts will be implemented by
2016, the company said. At the same time, Siemens will add a
site in Asia to cope with demand for local gas power plants.

Loescher, on his second five-year term, has come under
pressure to boost profitability and refocus Siemens after some
deals that he supervised soured, and a push into more
environmentally friendly energy generation led to spiraling
costs. The company said in December that the energy business
will contribute savings of 3.2 billion euros to the cost cutting
plan.

Lagging Profitability

Siemens’ profitability has lagged that of GE and ABB for
six consecutive quarters. The company said in January that
first-quarter profit declined on charges for delays in high-
speed trains orders and a failed solar power project, adding to
more than 1 billion euros in predicted restructuring costs this
year.

Siemens is also planning to offload units such as airport
luggage systems, mail automation and water technology after
shareholders approved the spinoff of the underperforming Osram
lighting unit.

Further details about the planned cuts will be presented to
employee representatives in the coming weeks, the people said
today.